Document: Erlanger RFP Response/Proposal

It's unclear what the future holds for Hutcheson Medical Center after it was turned down Tuesday for a "critically needed" $2 million loan.

But it may be telling that elected officials and others used the past tense to describe the publicly owned Fort Oglethorpe hospital that's more than $60 million in debt.

"It served its purpose over the years. It's been a good hospital," Catoosa County Commissioner Dewayne Hill said, adding that the hospital's financial problems started years ago.

"The choices in some previous years have not been very wise," he said.

Hutcheson's spokeswoman, Stacey Kaufmann, put a different spin on things.

"We are here to stay," she said.

Kaufmann said a lender, whom she declined to name, has come forward to help.

"We are working on liquidity solutions with a financial lender who approached us given our successful operational turnaround of $10.2 million over the last two years," she said.

The hospital wanted the $2 million loan to tide it over, she said, while it waits to be reimbursed more than $1 million by the federal government for an electronic medical records system it was required to pay out-of-pocket to install.

'Austerity measures'

Hutcheson's board asked for the $2 million loan on Nov. 25 -- the same day it announced the hospital would remain independent after a request for proposals to manage Hutcheson drew only two responses, neither of which was deemed acceptable.

"Hutcheson is in critical need of interim financing," Catoosa County Attorney Clifton "Skip" Patty told commissioners as discussion began Tuesday.

But none of the commissioners supported a motion to make the loan.

"We are at the point where we can no longer provide any interim or stop-gap measures for the hospital ... without putting our taxpayers at risk," commission Chairman Keith Greene said.

Walker and Catoosa counties have already backed $6 million in temporary financing through Regions Bank plus $20.5 million more that Erlanger Health System loaned to Hutcheson as part of its management of the hospital from April 2011 to August of this year, when Hutcheson decided to part ways with Erlanger.

The hospital needed the $2 million to make payroll, Walker County Sole Commissioner Bebe Heiskell said on Nov. 25, when she held a special meeting to announce she would back a loan of up to $2 million -- provided Catoosa County or Dade County also backed it. The three counties created the hospital authority decades ago.

"We're not going to back anything," Dade County Executive Ted Rumley said Tuesday afternoon. "Unless there is a guaranteed payback of some type."

Heiskell couldn't be reached for comment Tuesday.

Hutcheson met its payroll Friday -- without the loan, Kaufmann said.

"We did payroll last week," she said. "Payroll went through just fine."

Kaufmann declined to comment about what cuts might be in the works.

"Unfortunately, I'm not at liberty to share strategic financial or operational plans ... at this time," she wrote in an email.

But Patty said the hospital is planning cuts.

"They're planning some austerity measures," he said.

Hospital board 'has totally failed'

Several citizens thanked commissioners for denying the loan.

"I want to commend you guys for turning down the $2 million request," said Cherise Miller, who regularly attends commission meetings. "We have gone too far with this. In fact, I think we've gone way too far."

Hutcheson's various boards -- which regularly meet in "executive session" behind closed doors-- came in for criticism.

"The main thing that bothers me is we don't know what's going on," Catoosa County resident Barbara Wilson said. "Yet we're asked to provide funds when we don't know anything."

Speaking by phone later, Rumley seconded that.

"They do go into a lot of executive sessions," Rumley said. "The public needs to be more informed -- and the commissioners, honestly."

The hospital board got a scolding from Catoosa County resident Roger Nelson, who on Friday sent a mass email to "all Catoosa, Walker or Dade county taxpayers and voters" with a list of 26 questions he thinks the board needs to answer, including how it voted to spend up to $652,000 to obtain a new CT scanner on the same night it sought the $2 million loan.

"The hospital authority board members have totally failed," Nelson said. "They have failed, and I think the commissioners from all three counties should ask for a total resignation of that board -- every board member."

Commissioner Greene stood up for his county's appointees.

"I believe the ... members we have from Catoosa County have done a good job," he said. If anyone's to blame, he said, it's Erlanger Health System, which ran Hutcheson for 16 months.

"Erlanger was given that opportunity to improve the hospital," Greene said.

Erlanger's offer

Hutcheson this week released the two offers it received in response to its request for proposals. One was from Erlanger Health System, which the board considered. The other was from James C. Rogers, president of Chattanooga-based Liberty Health Inc., which the board didn't consider.

Erlanger's 66-page proposal offered to pay $2.5 million annually to lease everything except a few of Hutcheson's facilities, such as the Parkside Nursing Home and the hospice, for 10 years with the option to extend the lease for 10 years. Erlanger also offered to buy or lease $5 million worth of new equipment.

In exchange, Erlanger wanted Walker, Catoosa and Dade counties to repay the $20.5 million loan, act as landlord by keeping all the facilities in excellent condition and commit money from the Parkside Nursing Home, which is for sale, toward hospital improvements -- at a minimum, $2.5 million worth.

Officials from the three counties were willing to issue long-term, low-interest bonds to consolidate the hospital's more than $60 million in debt -- provided that the health care organization that leased Hutcheson guaranteed to cover the annual bond payment, estimated at $4.4 million in the request for proposals.

The $2.5 million offered by Erlanger is almost $2 million shy of what county officials hoped to get.

Taxpayers from the three counties haven't directly paid taxes toward Hutcheson in decades.

And Greene said that a tax increase to fund the hospital isn't something Catoosa County commissioners would consider.